KUALA LUMPUR: The Employees Provident Fund (EPF) registered strong financial performance in the first quarter ended March 31, 2017 with investment income of nearly RM11.8bil, aided by an improvement in the equities markets and sharply lower impairments.
It said on Tuesday the income was up 73.9% from RM6.78bil a year ago.
The value of EPF investment assets reached RM747.17bil, up 2.2% or RM16.06bil from Dec 31, 2016.
“Out of the total investment asset, RM352.73bil, or 47.2%, were in Shariah-compliant investment while the balance were invested in non-Shariah assets,” it said.
Commenting on EPF’s Q1, 2017 investment performance, its chief executive officer Datuk Shahril Ridza Ridzuan said both the domestic and global markets improved significantly compared with the first quarter last year.
“The FBM KLCI grew by 6%, driven by the growth in the banking sector, while global indices improved by as much as 12%, a striking difference from the market environment last year.
“The positive market condition was conducive for profit taking activities leading to higher gross investment income in Q1, 2017 and also lower net impairment.”
In accordance with the Malaysian Financial Reporting Standards (MFRS 139), the EPF recorded lower net impairments from RM1.64bil to RM775.92mil this year, a decrease of RM865.08mil, following the improvement in all major markets.
“While we have had an encouraging first quarter, we remain cautious moving forward as recovery in commodity prices remains weak with continued currency volatility,” said Shahril.
Shahril pointed out in Q1, 2017, that equities — which made up 41.76% of the EPF’s total investment assets – contributed RM7.10bil or 60.2% of total investment income.
This was 178.6% higher from the RM2.55bil recorded a year ago. The recovery in banking sectors contributed to about 30% of the trading and dividend income for the portfolio during the quarter.
“In addition to improvement in the domestic equity market, the global market also continued to provide opportunities for the EPF to realise its gains despite volatilities arising from the elections in eurozone countries, President Trump’s healthcare bill, the US interest rate hike and negotiations surrounding Brexit.
“These market moving factors were alleviated by the positive economic numbers, including the revised growth forecast for major economies,” he said.
The EPF’s overseas investment accounted for 29% of its total investment asset and contributed 37% to the total investment income recorded in Q1, 2017.
As at March 2017, a total of 49.08% of EPF’s investment assets was in fixed income instruments, which continue to provide consistent and stable income. Fixed income investments recorded an income of RM4.07bil, or 34.6% of the quarterly investment income.
Income from Malaysian Government Securities (MGS) and equivalent in Q1, 2017 increased 3.67%, or RM68.56mil, to RM1.94bil from RM1.87bil a year ago.
As for loans and bonds, they generated an investment income of RM2.14bil, compared with RM1.87 billion in Q1 2016.
Investments in money market instruments and real estates & infrastructure each represented 5.04% and 4.11% of the total investment assets, and contributed investment income of RM372.79mil and RM246.27mil respectively in Q1 2017.
Since the start of the Simpanan Shariah on Jan 1, 2017, a total of RM952.10mil out of the total gross investment income of RM11.79bil was generated for Simpanan Shariah while RM10.84bil for Simpanan Konvensional.
Shahril explained that the Simpanan Shariah derives its income solely from its portion of the Shariah assets while the income for Simpanan Konvensional is generated by its share of Shariah and also non-Shariah assets.
He also pointed out the performance of both Simpanan Shariah and Simpanan Konvensional would hinge on market performance, thus making short-term differences between the two inevitable.
However, in the long run, the performance of the two should be similar following similar strategies implemented for both accounts.
He emphasised the EPF remains focused on delivering real dividend target of at least 2% above inflation over a three-year rolling period for both Simpanan Shariah and Simpanan Konvensional.